Macro Links March 5th – “Trade Wars Are Good”
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MACRO LINKS TABLE OF CONTENTS (Click or Scroll Down)
- BITCOIN, CRYPTOCURRENCY, INITIAL COIN OFFERINGS
- FOREX, CARRY TRADES, EXCHANGE RATES
- TRADE, PROTECTIONISM, REGULATION, OVERSIGHT
- BUDGET, INFRASTRUCTURE, HEALTHCARE, IMMIGRATION
- GUN CONTROL, MARIJUANA BOOM, PUBLIC POLICY
- TAXATION, WEALTH HAVENS, INEQUALITY
- RUSSIA MEDDLING, RUSSIA PROBE, TRUMP WORLD
- NORTH / SOUTH KOREA, IRAN, NUCLEAR WEAPONS
- INFLATION, RATES, DEBT AND CREDIT, BALANCE SHEETS
- VOLATILITY, BLACK SWANS, LIQUIDITY, TAIL RISKS
- MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
- CENTRAL BANKS & MONETARY POLICY
- GLOBAL ECONOMY, INTERNATIONAL
- POSITIONING, INFLECTION, MARKET CALLS
- COLOR, EARNINGS, SENTIMENT, VALUATIONS
- DEALS, MERGERS, IPOs, LBOs, RESTRUCTURINGS
- HEDGE FUNDS, PRIVATE EQUITY, MONEY MGMT
- ENERGY RENEWABLES, NUCLEAR
- POLLUTION, CLIMATE & ENVIRONMENT
- BREXIT, SCOXIT, LONDON, UK ECONOMY
- GEOPOLITICS, CRIME, TERRORISM
- ELECTORAL POLITICS
- SCANDALS, LAWSUITS, FINES, REGULATORY
- SILICON VALLEY, UNICORNS, STARTUPS, VC
- AUTOS, ELECTRIC, SELF-DRIVING
- ARTIFICIAL INTELLIGENCE, DRONES, FUTURE TECH
BITCOIN, CRYPTOCURRENCY, INITIAL COIN OFFERINGS
“The time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system,” the Bank of England governor said Friday in a speech at Bloomberg’s European headquarters in London. Carney, who is also head of the Financial Stability Board, joins a growing chorus calling for greater oversight of the technology after the explosion of new cryptocurrencies created more than $438 billion in paper wealth since March 2, 2017, according to research site CryptoMarketCap.com.
Cryptocurrencies such as Bitcoin are failing as a form of money and have shown clear signs of being a financial bubble, but their technology could improve the financial system in future, Bank of England Governor Mark Carney said on Friday.
Earlier this year, when Bitcoin’s price fell by more than 60 percent from its record close, a less-noticed Bitcoin figure also plunged: the number of daily transactions. There are many explanations for the fall-off in trading, from software- to news-related. What’s less understood is why the level hasn’t recovered as Bitcoin’s price made a 50 percent comeback since Feb. 5. That’s left some investors wondering whether the cryptocurrency is waning in popularity.
Some of the funds stolen from Coincheck Inc. in the $500 million heist have been traced to a cryptocurrency exchange in Canada, according researcher BIG Blockchain Intelligence Group Inc.
The Australian Tax Office will be going after cryptocurrency investors to ensure they are accurately filing their crypto gains on their taxes this year, Business Insider Australia reported Feb. 28. The Australian Tax Office will use data matching and “100-point identification checks” to track down crypto investors, as well as bilateral tax treaties and anti-money laundering commitments to get more information out of the traditionally anonymous crypto sphere and markets.
The latest scam in the cryptocurrency market comes from a non-existent coin that falsely claims to be backed by Virtu Financial Inc., the electronic-trading firm that famously lost money on only one day from 2009 to 2014.
FOREX, CARRY TRADES, EXCHANGE RATES
The Canadian dollar has been under pressure in recent weeks on concerns that negotiators will fail to reach an agreement to overhaul the North American Free Trade Agreement. President Donald Trump added to trade worries Thursday, pledging to impose tariffs of 25 percent on imported steel and 10 percent on aluminum. Canada is the largest exporter of steel to the U.S.
TRADE, PROTECTIONISM, REGULATION, OVERSIGHT
U.S. President Donald Trump struck a defiant tone on Friday, saying trade wars were good and easy to win, after his plan to put tariffs on steel and aluminum imports triggered threats of retaliation from trading partners and a slide in stock markets. The European Union raised the possibility of taking countermeasures, France said the duties would be unacceptable, and China urged Trump to show restraint. Canada, the biggest supplier of steel and aluminum to the United States, said it would retaliate if hit by U.S. tariffs.
President Trump on Saturday threatened to hammer European automotive companies with steep tariffs as his global trade war snowballed into a third day. Trump, in a series of Twitter posts while at his Mar-a-Lago resort in Florida, appeared to be responding to warnings from European leaders that his promised tariffs on aluminum and steel would trigger retaliation from numerous major U.S. trading partners.
President Donald Trump plans to apply his steel and aluminum tariffs globally and won’t exempt allies such as Canada and Europe, a senior White House official said Friday, an approach that is likely to intensify protests over the move. Fears of such a broad-based approach drew complaints and counter-threats from the European Commission—which said Friday it had already crafted a detailed retaliation package—and from Canadian Prime Minister Justin Trudeau, who warned of “significant and serious” disruptions to the North American economy.
Both Ross and White House trade officer Peter Navarro, who appeared on several Sunday news shows, said they had no reason to believe that Trump would exclude allies such as Canada, the European Union, Japan and South Korea from the proposed 25 percent tariff on steel and 10 percent tariff on aluminum.
On Wednesday evening, the president became “unglued,” in the words of one official familiar with the president’s state of mind. A trifecta of events had set him off in a way that two officials said they had not seen before: Hope Hicks’ testimony to lawmakers investigating Russia’s interference in the 2016 election, conduct by his embattled attorney general and the treatment of his son-in-law by his chief of staff.
President Donald Trump’s tariff plan is getting a cold reception on Wall Street. A CEO of a top six U.S. bank told CNBC that Trump’s proposal is a “huge, huge mistake” and will have “global repercussions.”
“This is just straight up stupid,” Adam Posen, president of the Peterson Institution for International Economics, said Friday. “This is fundamentally incompetent, corrupt or misguided.” Posen, who served at the Federal Reserve Bank of New York in the mid-1990s, currently sits on the panel of economic advisors to the U.S. Congressional Budget Office.
Republican senators are not too happy with the White House right now. After President Donald Trump said Thursday that his administration will impose tariffs on steel and aluminum imports next week, GOP senators spoke out about their fear of retaliation from other countries and the lack of communication from the White House.
President Donald Trump’s decision to unilaterally slap tariffs on imports of steel and aluminum has upended the NAFTA renegotiation and threatens to derail talks that were already politically and economically sensitive for all three countries. Since the announcement, negotiators have been “just going through the motions — that’s it,” Jerry Dias, president of Canada’s largest labor union, Unifor, told POLITICO on the sidelines of the talks on Friday.
Thousands of jobs could be lost in US manufacturing because of President Donald Trump’s plan to impose new tariffs on steel and aluminium imports, industry groups warned on Thursday. Manufacturing groups said that the president’s planned 25 per cent duty on steel could lead to many more jobs disappearing than would be saved, because higher costs would make plants in the US less competitive.
A day after President Trump took a swing at United States trading partners by threatening stiff and sweeping tariffs on steel and aluminum, they hit back. They promised to retaliate against quintessential American goods like Kentucky bourbon, bluejeans and Harley-Davidson motorcycles. That is likely to turn into a wave of protest aimed at American products as other countries, including traditional allies, respond to Mr. Trump’s plan to clamp down on imports of metals from overseas.
“It is entirely inappropriate to view any trade with Canada as a national security threat to the United States,” Freeland said in a statement. “Should restrictions be imposed on Canadian steel and aluminum products, Canada will take responsive measures to defend its trade interests and workers.” The United States, Canada and Mexico are in Mexico City this week for the seventh round of the North American Free Trade Agreement talks.
Donald Trump set the stage for a trade war by slapping tariffs on steel and aluminum imports, daring other countries to retaliate and leading the European Union to warn that it would target iconic American brands. In turn, the U.S. president put the European auto industry in his sights.
Investors in technology shares are concerned that the industry could be the next victim of the Trump administration’s increasingly combative stance toward global trade partners. While Donald Trump’s broadsides this week against what he deemed unfair trade practices focused on industrial metals, comments he made over the past couple of months about the tech industry indicate it could soon come in for targeting as well. Those warnings are now sounding more ominous to investors concerned about a trade war between the world’s two biggest economies.
“There are more common interests [between China and the US] than differences so co-operation is the only option for both countries,” said Zhang Yesui, vice-foreign minister, on Sunday ahead of the annual session of China’s rubber-stamp parliament. “China does not want a trade war with the US.”
Billionaire investor and longtime Trump confidant Carl Icahn dumped $31.3 million of stock in a company heavily dependent on steel last week, just days before Trump announced plans to impose steep tariffs on steel imports.
BUDGET, INFRASTRUCTURE, HEALTHCARE, IMMIGRATION
“This is retaliation from an administration hostile to immigrants,” said David Huerta, President of the Service Employees International Union United Service Workers West. “Fruit is going to die on the vine this year because of this administration. This government does not understand the contribution of immigrant labor to whole industries, and their failure to see that will have its consequences.”
GUN CONTROL, MARIJUANA BOOM, PUBLIC POLICY
The Russian banker under scrutiny for money transfers to the National Rifle Association said the organization helped him meet President Trump. Alexander Torshin, a deputy head of Russia’s central bank, is one of his country’s strongest supporters of the NRA, even hosting dinners for an American delegation that came to Moscow in 2015.
The White House signaled that President Donald Trump is backing away from a broad overhaul of U.S. gun policy and focusing on more modest changes, after his meeting with the National Rifle Association. White House press secretary Sarah Huckabee Sanders told reporters Friday morning Mr. Trump now considers a federal increase in the minimum age as likely unrealistic.
BlackRock Inc., the world’s largest asset manager, said it’s exploring ideas for new funds, including index-based portfolios, that exclude gun makers and retailers. The firm, which manages more than $6 trillion in assets, is also working with clients that want to change or eliminate exposure to firearms, according to a document posted Friday on the company’s website.
Lawmakers in at least 24 states from Hawaii to Maryland are pushing bills that would allow courts to temporarily take guns from people deemed dangerous, a gun-control concept gaining ground as a politically feasible response to last month’s shooting in Florida.
TAXATION, WEALTH HAVENS, INEQUALITY
According to the Hurun Report, a research organization in Shanghai that tracks the wealthy in China, the net worth of the 153 members of China’s Parliament and its advisory body that it deems “super rich” amounts to $650 billion, up by nearly a third from a year ago. That is just a touch below Switzerland’s annual economic output. While President Xi Jinping has pledged to close the income gap and alleviate poverty, the wealth of the nation’s lawmakers has kept soaring. In 2017, it topped $500 billion, more than doubling from the year before.
Here’s why withholding matters so much this year. The tax overhaul didn’t shift rates as much as some lawmakers proposed, but it made landmark changes to individual provisions. So the overhaul’s effects will vary widely among filers depending on which changes apply.
Flush with cash from President Donald Trump’s tax overhaul and bathing in more earnings than they know what to do with, U.S. companies are embarking on a buyback binge of historic dimension. How big will it be? JPMorgan Chase & Co. strategists led by Dubravko Lakos-Bujas estimate that gross share repurchases will reach a record of around $800 billion this year, up from $530 billion in 2017.
RUSSIA MEDDLING, RUSSIA PROBE
As Russia’s virtual war against the United States continues unabated with the midterm elections approaching, the State Department has yet to spend any of the $120 million it has been allocated since late 2016 to counter foreign efforts to meddle in elections or sow distrust in democracy. As a result, not one of the 23 analysts working in the department’s Global Engagement Center — which has been tasked with countering Moscow’s disinformation campaign — speaks Russian, and a department hiring freeze has hindered efforts to recruit the computer experts needed to track the Russian efforts.
Jared Kushner’s firm made a direct pitch to Qatar’s minister of finance in April 2017 in an attempt to secure investment in a critically distressed asset. The failure to broker the deal would be followed only a month later by a Middle Eastern diplomatic row in which Jared Kushner provided critical support to Qatar’s neighbors. Led by Saudi Arabia and the United Arab Emirates, a group of Middle Eastern countries, with Kushner’s backing, led a diplomatic assault that culminated in a blockade of Qatar. Kushner, according to reports at the time, subsequently undermined efforts by Secretary of State Rex Tillerson to bring an end to the standoff.
Though he has lately resisted the impulse to criticize “Saturday Night Live,” President Trump was lured into an online war of words with Mr. Baldwin, who plays him on the show.
In events that have played out publicly on Instagram and YouTube for months, Ms. Vashukevich has revealed what she says was her close association with the aluminum tycoon Oleg V. Deripaska and his friendship with Russia’s powerful deputy prime minister, Sergei E. Prikhodko. Ms. Vashukevich, in a video that she apparently recorded in the back of a Thai police truck after her arrest, said she could provide evidence of Russian interference in the 2016 United States presidential election.
A leak of internal data from the Kremlin-backed Internet Research Agency discovered by The Daily Beast serves as the first confirmation that the Russian troll farm deployed its online agitators on Reddit as part of its campaign to interfere in American politics. The internet giants are staying mum after a leak from the Kremlin-backed troll farm confirmed that they were key nodes in the Russian disinformation campaign.
Russian operatives attempting to discourage U.S. energy production posted thousands of messages on social media supporting environmental activists in their campaign to limit oil and gas projects, a report by Republican lawmakers said on Thursday.
Special counsel Robert Mueller is assembling a case for criminal charges against Russians who carried out the hacking and leaking of private information designed to hurt Democrats in the 2016 election, multiple current and former government officials familiar with the matter tell NBC News.
One source — who is a presidential ally — is worried, really worried. The source says this past week is “different,” that advisers are scared the President is spiraling, lashing out, just out of control. For example: Demanding to hold a public session where he made promises on trade tariffs before his staff was ready, not to mention willing. “This has real economic impact,” says the source, as the Dow dropped 420 points after the President’s news Thursday. “Something is very wrong.”
Many mid- and low-level staffers are anxious to leave and are actively looking for jobs elsewhere, sources close to the White House say. Those staffers saw the surprising resignation of Trump loyalist and communications director Hope Hicks on Wednesday as a sort of tipping point.
NORTH / SOUTH KOREA, IRAN, NUCLEAR WEAPONS
Russian President Vladimir Putin on Thursday used a concept video of unlimited range nuclear warheads apparently raining down on Florida — President Donald Trump’s home away from home — to tout his country’s new firepower. Putin boasted about the Kremlin’s resurgent military might during his annual address to his nation’s Parliament, hyping weaponry that he said would render NATO defenses “completely useless.”
The new policy will still call for bolstered technology against rogue states, with a particular focus on weapons to intercept North Korean leader Kim Jong Un’s missiles. But it will also mention the need to consider missile threats from Russia and China, according to people familiar with the review.
While defence analysts described some of the capabilities cited in Mr Putin’s speech as credible, many urged caution about the Russian president’s claims. “Do any of these work? Do they even exist?,” asked Joe Cirincione, president of Ploughshares Fund, a global security foundation, on Twitter. “They are all in some stage of development.” Malcolm Rifkind, the UK’s former foreign secretary, described Mr Putin’s speech as a classic piece of political propaganda. “On one level it’s a bit like Kim Jong Un saying ‘I’ve got nuclear weapons and no one can touch me’,” he said. “It’s being done for effect.”
INFLATION, RATES, DEBT AND CREDIT, BALANCE SHEETS
It’s yet another infuriating inconvenience of living in an imploding economy. Low-denomination bills—anything below 100 bolivars ($0.0005 at the black-market rate)—are often used nowadays for such things as confetti at baseball games. And the government is so broke, it can’t afford to print bigger bills fast enough. It’s a curiosity, this whole mess, almost bordering on a Yogi-ism: Hyperinflation’s rendered paper money so worthless that it’s become incredibly valuable.
Small banks have been fighting for a bigger piece of the credit-card market in search of higher returns. Now, they’re contending with rising losses. Missed payments on credit cards at small banks have risen sharply over the past year, a sign that their cardholders are taking on more debt than they can handle. Their charge-off rate, or the share of outstanding card balances written off as a loss after consumers failed to pay, hit 7.2% in the fourth quarter, up from 4.5% a year ago, according to Federal Reserve data.
VOLATILITY, BLACK SWANS, LIQUIDITY, TAIL RISKS
The survivor is the ProShares Short VIX Short-Term Futures ETF, ticker symbol SVXY, which escaped with a mere 92% loss over five sessions in early February. On Thursday, when markets fell sharply, the fund retreated by less than 3% for what was just its 245th worst day ever. That relatively tame move by the ETF is because ProShares unexpectedly cut the fund’s exposure to volatility on Tuesday to 0.5 times the index’s return.
The Senate is preparing to scale back the sweeping banking regulations passed after the 2008 financial crisis, with more than a dozen Democrats ready to give Republicans the votes they need to weaken one of President Barack Obama’s largest legislative achievements. “On the 10th anniversary of an enormous financial crash, Congress should not be passing laws to roll back regulations on Wall Street banks,” Sen. Elizabeth Warren (D-Mass.) said in an interview.
MACRO OP-EDS, INSIGHT, EVENTS AND TRENDS
President Trump is finally following through on the trade crackdowns that terrify Republican leaders in Congress and many economists. “Industries that buy steel and aluminum, not to mention agricultural exporters, employ many times more people than the industries that the president wants to protect,” said Peter A. Petri, an economist and trade expert at Brandeis University’s International Business School. “Whether we go through with his approach is anyone’s guess, but business investment depends on predictable policy, and relentless chaos takes its toll even if cooler heads prevail on the policies that the president is tweeting about.”
The most immediate losers are the industries that rely on steel and aluminum as an input and will face higher prices. That includes some of the nation’s biggest industries: the automobile sector; aerospace; heavy equipment; and construction. In short, the chassis of a Ford, the body of a Caterpillar bulldozer, the wings of a Boeing aircraft, and the steel girders inside a New York skyscraper are all about to get more expensive. The industries that use steel and aluminum are considerably larger as a share of the United States economy than are steel and aluminum producers. By one estimate, from Lydia Cox of Harvard and Kadee Russ of the University of California, Davis, steel-using industries employ 80 times as many people as steel-producing industries.
It was once said that Britain lost its empire in a fit of absent-mindedness; the United States, it now appears, could lose its own in a fit of Donald Trump’s impulsiveness. But the issue is not simply the economic consequences. The president’s announcement was the clearest and most disturbing sign yet that he is quite prepared to take ill-considered actions that will chip away at the foundations of the global trading system.
“Steel is just a tiny input in the U.S. gross domestic product (GDP) — which is why it’s so crazy. You mess up your entire trading system for an industry that has a total of 80,000 jobs,” Posen argued. 2015 census data showed roughly 140,000 Americans employed in steel mills, contributing $36 billion to the national economy. By comparison, steel-consuming industries, which experts believe will be hardest hit by the tariffs, employ 6.5 million Americans and add about $1 trillion to U.S. GDP, according to the census.
Cryptocurrency traders are learning that where they buy and sell digital tokens can be just as risky as choosing a coin or picking a price. Investors have lost more than $700 million this year in hacks of two major cryptocurrency exchanges. The hacks reflect an oft-overlooked risk of trading in bitcoin and related digital currencies: While scores of online exchanges have sprung up in the past two years as crypto prices surged, they typically bear little resemblance to the well-financed, better-regulated venues that enable investors to buy and sell stocks, bonds and commodities.
Circle, a cryptocurrency-focused financial-services firm, will announce today that it is buying crypto exchange Poloniex—a move that immediately makes Circle one of the largest and most influential companies in the industry. Fortune’s Robert Hackett profiles a company that hopes to leverage the technology behind Bitcoin to become the bank of the next century.
China used to profess no interest in how other countries run themselves, so long as it was left alone. Increasingly, however, it holds its authoritarian system up as a rival to liberal democracy. At the party’s 19th congress last autumn, Mr Xi offered “a new option for other countries” that would involve “Chinese wisdom and a Chinese approach to solving the problems facing mankind.” Mr Xi later said that China would not export its model, but you sense that America now has not just an economic rival, but an ideological one, too.
President Donald Trump bemoaned a decision not to investigate Hillary Clinton after the 2016 presidential election, decrying a “rigged system” that still doesn’t have the “right people” in place to fix it, during a freewheeling speech to Republican donors in Florida on Saturday. In the closed-door remarks, a recording of which was obtained by CNN, Trump also praised China’s President Xi Jinping for recently consolidating power and extending his potential tenure, musing he wouldn’t mind making such a maneuver himself. “He’s now president for life. President for life. No, he’s great,” Trump said. “And look, he was able to do that. I think it’s great. Maybe we’ll have to give that a shot some day.”
Special counsel Robert S. Mueller III is significantly turning up the heat on President Trump. While the president once again attacks his own attorney general and declares himself the victim of a “witch hunt,” he faces increasingly ominous signs that Mueller has the president’s innermost circle — and Trump himself — in his sights.
It’s certainly true that, if Putin’s claims are accurate, they represent a step forward in missile technology that existing U.S. missile systems would be unable to match. There’s another important detail here, however: U.S. missile defense systems are almost certainly no match for existing Russian missiles, either.
In America’s rural and working-class areas, keeping chickens has long been a thrifty way to provide fresh eggs. In recent years, the practice has emerged as an unlikely badge of urban modishness. But in the Bay Area — where the nation’s preeminent local food movement overlaps with the nation’s tech elite — egg-laying chickens are now a trendy, eco-conscious humblebrag on par with driving a Tesla.
While people in the West debate about whether the internet and social media undermine democracy, a big question for many Chinese is whether cutting-edge technology strengthens the iron fists of autocrats. China’s government is embracing technologies to monitor its population. A national plan to develop artificial intelligence highlights its “irreplaceable role in effectively maintaining social stability.” Surveillance cameras with facial recognition, policing platforms that crunch big data and the monitoring of smartphones and social media are being deployed.
Fridson’s findings have one simple implication for money managers: They may be using a flawed benchmark. When junk bonds lose money—as they have this year—portfolio managers may be compared against an unfairly inflated index. In an up year, managers may look better than they deserve. The findings may have other implications. Metrics like Sharpe ratios, which are based on market deviations, “paint too rosy a picture” of the junk-bond market’s risk-reward ratio, as Fridson puts it. Investors who use such metrics to guide their decisions may need to adjust that figure to correct for this anomaly.
The social-media giant played down allegations Russia exploited its platform during the 2016 elections, deepening perceptions that its leaders are oblivious to public concern about its social impact. The reaction has exacerbated a brewing backlash against many of Silicon Valley’s largest companies.
The lack of investment in understanding gun violence is a national scandal. “If you look at how much the federal government spends on research related to different causes of mortality that kill about the same number of people,” Andrew Morral, project director of Rand’s gun research effort, told me, “you find the government spends less than two percent as much on gun violence and gun policy.”
The world’s biggest marketers are taking aggressive steps to change how they buy ads, triggering upheaval across the advertising industry. The developments highlight the fallout as marketers reassess their relationships with ad agencies and big tech companies like Facebook Inc. and Alphabet Inc.’s Google in an increasingly complex media environment.
Thousands of Venezuelans are pouring out of their crippled nation in one of the biggest migration crises in Latin American history, causing growing alarm in the region and prompting neighboring countries to rush thousands of soldiers to the border. The massive scale of the exodus is being compared to the flow of Syrians into Western Europe in 2015. And, just as in that crisis, countries overwhelmed by the flood of new arrivals are beginning to bar their doors.
It was supposed to be the crowning achievement of Malaysian tycoon T. Ananda Krishnan’s five-decade career. But his $7 billion bet on mobile carrier Aircel Ltd. may instead go down as one of the biggest-ever flops by a foreign investor in India, a stark reminder that doing business in the world’s fastest-growing major economy is often a lot tougher than it looks. Krishnan’s holding company stands to lose all the money it poured into Aircel over the past 12 years, people with knowledge of the matter said, after the carrier filed to start bankruptcy proceedings this week. Buffeted by intense competition and regulatory uncertainty, Aircel is the latest in a long list of casualties in an Indian telecom market that only a few years ago was luring foreign entrants in droves.
CENTRAL BANKS & MONETARY POLICY
“He was forthright in setting out his interpretation of what will happen with the economy rather than emphasising uncertainty all the time. There was a minimum of verbal hedging,” said Marc Sumerlin of Evenflow Macro. This blunt approach was no accident. Mr Powell has repeatedly pledged to bolster Fed transparency so the US public understand its policy decisions. To close Fed watchers, his plain-speaking approach hints at a chair who will seek to provide a vocal policy lead amid a cacophony of voices from within the Fed system that can sometimes lead to market confusion.
GLOBAL ECONOMY, INTERNATIONAL
Angela Merkel is heading for her fourth term as chancellor of Germany, after two-thirds of rank-and-file members of the Social Democratic party voted in favour of a grand coalition with the veteran leader’s conservative bloc. The vote ends five months of political stalemate and government drift in Berlin, and could help restore Germany’s leadership role in Europe at a time of mounting political challenges, including a looming trade war with the US, rising tension over Brexit and French demands for an overhaul of the eurozone.
President Xi Jinping is counting on a gathering of nearly 3,000 lawmakers to show unequivocal support for his bid to govern China indefinitely by setting aside a decades-old safeguard against despotic rule. The annual legislative session, which starts Monday, is set to approve a proposal to scrap presidential term limits. But anything less than a near-unanimous vote at the National People’s Congress could signal disquiet within the Chinese establishment and embolden critics of Mr. Xi in a country scarred by the disastrous policies of Mao Zedong.
After leading the Group of Seven in growth last year, Friday’s numbers show a Canadian economy that has lost momentum, seemingly hampered by longstanding productivity issues and the growing potential of a hangover from the real estate boom. The U.S. economy recorded growth rates of 3.2 percent in the third quarter and 2.5 percent in the last three months of 2017. Canada hasn’t trailed the U.S. in growth to this extent since early 2015.
Japan’s jobless rate fell to a low of almost 25 years in January, while a ratio of job openings remained at a 44-year high, the latest signs that the labor market is tightening as the world’s third-largest economy continues its growth streak.
POSITIONING, INFLECTION, MARKET CALLS
The most likely challenger in the race to a trillion would be Jeff Bezos and Amazon.com Inc. It has a market cap of $732 billion dollars — and an infinitely higher valuation — so it has a tougher road to travel. But I would not put anything past Bezos & Co., and it would not be the first time they saw a 35 percent gain in a year.
At 36 percent of all trading sessions, the frequency of big days is higher than in all bull market years since World War II except one. That was 2011, when a downgrade of the U.S. sovereign rating sent the index to the brink of a bear market decline of 20 percent. Gone are the calm days. In their place are lurches and rebounds, as investors reassess the durability of the nine-year equity rally. Lately, the prevailing direction has been down.
This week the S&P 500 registered three straight days of declines of more than 1 per cent, its first hat-trick of such daily losses for more than two years, as the market struggles to establish a footing nearly a month after recording a 10 per cent correction. Although US equities managed to stage a modest rebound on Friday, the fragile mood across global equities has intensified as global carmakers and Asia and European steel and aluminium manufacturers suffered sharp declines to end the week.
COLOR, EARNINGS, SENTIMENT, VALUATIONS
After one of their toughest years ever, beleaguered U.S. retailers are enjoying a pickup in quarterly sales, helping to boost the shares of many brick-and-mortar operators even as the stock market stumbles this year.
After the strongest holiday-shopping season in more than a decade, investors have grown increasingly impatient with retailers that didn’t enjoy the good fortune. Shares of J.C. Penney Co. and Foot Locker Inc. tumbled on Friday in the wake of lukewarm results during the fourth quarter, which included the crucial Christmas season. The chains both posted weaker-than-expected comparable sales, a key benchmark.
DEALS, MERGERS, IPOs, LBOs, RESTRUCTURINGS
Qualcomm recently secured a $44bn agreement to buy NXP, a Dutch group that makes chips for German passports, and European officials are uncomfortable with Broadcom having access to such information. “We are concerned about the possibility of a European company handling sensitive data of EU citizens falling in the hands of a company that is based in Singapore, where data protection standards are lower than in the EU,” Josef Weidenholzer, vice-president of the S&D, the second-largest party in the European Parliament, told the Financial Times.
In a surprise twist in the continuing saga of the Weinstein Company, an investor group said on Thursday that it had reached an agreement to buy most of the assets of the near-bankrupt studio, just days after a deal had been declared all but dead. In keeping with the whipsawing sale process, however, it did not become clear that a deal had in fact been completed until the Weinstein Company’s board released a statement several hours later. “We consider this to be a positive outcome under what have been incredibly difficult circumstances,” the statement said.
HEDGE FUNDS, PRIVATE EQUITY, MONEY MGMT
Mr Woodford, whose investment prowess has been under intense scrutiny in recent months on the back of disappointing returns, has found himself in the most difficult of positions. Assets under management in the Woodford Equity Income fund have fallen from a £10.2bn high less than a year ago to £7.2bn today. With investors continuing to pull cash from his flagship fund, where performance is down 9 per cent over the past year, Mr Woodford faces twin challenges of meeting redemptions while balancing liquidity in his flagship fund.
The PruLev Global Macro Fund gave up almost one-third of last year’s 52 percent gain in February, after being caught out by the return of volatility. The fund, the world’s best performer last year among macro funds with assets of more than $100 million, lost 16 percent, mainly from stock bets, according to preliminary figures in a newsletter obtained by Bloomberg. The decline in the Singapore-based fund’s Class-B shares compares to a 0.9 percent drop in the Eurekahedge Macro Hedge Fund Index last month.
It’s likely that Mr. Schwarzman, 71 years old, took home significantly more than the $800 million disclosed by the firm. Over the past five years, his position has yielded him more than $3.2 billion, largely in dividends and fund payouts. Mr. Schwarzman is known to remark that his salary, $350,000, is similar to the starting pay for the firm’s greenest investment professionals.
ENERGY RENEWABLES, NUCLEAR
The world’s largest solar park set up at an investment of Rs 16,500 crore at Pavagada in Karnataka’s Tumakuru district was launched by Chief Minister Siddaramaiah today. The 2,000 MW park, named as ‘Shakti Sthala’, spans across 13,000 acres spread over five villages and is a benchmark in the unique people’s participation in power model put on ground, according to officials.
POLLUTION, CLIMATE & ENVIRONMENT
In Boston, high tide peaked Friday morning at 14.67 feet, the third-highest level since record keeping began in 1928, with water lapping at the feet of skyscrapers in some districts, according to the Boston Globe. The next high tide, at midnight, was forecast to be even higher, threatening to break the record set by historic floodwaters in January.
If Europe feels like the Arctic right now, the Arctic itself is balmy by comparison. The North Pole is above the freezing mark in the dead of winter. The Arctic warmth and the European cold snap have raised questions over whether the unusual weather occurrences are linked to each other, and if they are somehow related to climate change. Here are some answers.
BREXIT, SCOXIT, LONDON, UK ECONOMY
British Prime Minister Theresa May wants what the European Union has repeatedly said is impossible: frictionless trade with the bloc and the freedom for Britain to diverge from the EU rule book. European Council President Donald Tusk said it again Thursday before heading to London to meet with Mrs. May, who was to present her ideas in more detail in a speech on Friday. “There can be no frictionless trade outside of the customs union and the single market,” Mr. Tusk told a business conference in Brussels. “Friction is an inevitable side effect of Brexit.”
Brexit would lead to an unprecedented food shortage if the U.K. leaves the European Union without a deal, the CEO of the country’s second-biggest grocer said. “The impact of closing the borders for a few days to the free movement of food would result in a food crisis the likes of which we haven’t seen,” J Sainsbury Plc Chief Executive Officer Mike Coupe said in an interview. “It’s inconceivable to me that there won’t be a solution found.”
Mrs May conceded that Britain would be affected by its decision to quit the customs union and single market. But a conciliatory speech to EU ambassadors and business leaders in London received a frosty response in Brussels, where the prime minister is still seen as taking an unrealistic pick-and-mix approach to the single market. “Cake, more cake and buckets of cherries,” said one senior EU diplomat, referring to the view that Mrs May still wanted to have her cake and eat it and to “cherry pick” special sectoral deals.
“If we think there’s going to be a kind of a gumming up of the docks and the airports in March of next year and during a transition period then we’re going to have to start ordering additional components now,” Tom Williams, chief operating officer of Airbus’s commercial aircraft arm, said in an internal video posted to employees. “And that’s at a time when all of our suppliers are already pretty busy.”
Deng Xiaoping, the grandfather of China’s economic transformation, liked to say it didn’t matter what color a corporate feline was—state owned or private—as long as it caught mice. In the Xi Jinping era, being a privately owned fat cat is getting increasingly dangerous. The latest evidence of that came Thursday, when the respected online financial magazine Caixin reported that the chairman of the acquisitive privately held conglomerate CEFC China Energy, Ye Jianming, is under investigation. Shares in Hong Kong-listed CEFC Hong Kong Financial Investment plummeted more than 20% following the news.
The political fortunes of China’s “super wealthy” have suffered a dramatic reversal with a much reduced presence at the country’s annual parliamentary session, reflecting the diminished standing of the country’s richest under President Xi Jinping. “Although [the number of people on] the rich list has more than doubled over the last five years, the fact that there are fewer rich-list members at the NPC and CPPCC is a sign that it is becoming much harder to join,” said Rupert Hoogewerf, Hurun founder.
GEOPOLITICS, CRIME, TERRORISM
Ukraine is on the verge of obtaining 210 Javelin anti-tank missiles and 37 launch units from the US, in a $47m purchase approved by the Trump administration to help the country deter further offensives as the conflict in its eastern regions enters a fifth year.
The accusation against the Argentine intelligence chief, Gustavo Arribas, who owns several real estate properties in Brazil, is the first time a senior Argentine official in President Mauricio Macri’s administration has been accused in Brazil’s wide-ranging corruption investigation known as Lava Jato, or Car Wash.
SPD members approved the coalition pact by a wider-than-expected margin, which may make it easier for the party to effectively govern with Merkel’s Christian Democrat-led bloc. The result, unsealed on Sunday morning, was 66 percent in favor to 34 percent against. Before the vote, SPD leaders had said they hoped for 60 percent support.
SCANDALS, LAWSUITS, FINES, REGULATORY
The U.S. Department of Justice on Friday announced the indictment of six people and four corporate defendants, including London-based brokerage Beaufort Securities Ltd, over their alleged roles in international securities fraud and money laundering schemes totaling more than $50 million.
SILICON VALLEY, UNICORNS, STARTUPS, VC
It’s a deal that may transform the San Francisco Bay area’s largest city, which has been a cheaper alternative to the Silicon Valley boom towns such as Palo Alto or Google’s nearby home of Mountain View. The prospect of a Google influx into San Jose is stirring backlash by residents who fear the throng of new workers will push housing even more out of reach, while proponents say it will attract even more development and bring the city a new source of growth as a thriving tech hub.
The latest winner of the SoftBank Group Corp. lottery is DoorDash Inc., a food-delivery app. SoftBank’s Vision Fund is leading a $535 million investment in the San Francisco-based company, almost triple the amount of capital the company had raised in the last five years. Tony Xu, DoorDash’s co-founder and chief executive officer, said his real competition is the telephone. Most people still order food by calling a restaurant directly. “We’ve just scratched the surface, and our investors recognize the incredible opportunity ahead,” he said.
AUTOS, ELECTRIC, SELF-DRIVING
After Germany’s top administrative court on Tuesday allowed local authorities to bar heavily polluting diesel cars in major cities, the federal government is scrambling to find ways to avert driving bans that would hurt consumers and automakers. Environmental and motorist lobbies are raising the pressure on Volkswagen (VW) and its peers to modify the exhaust systems of older diesels which they say are a major source of toxic nitrogen oxide emissions that can cause respiratory disease.
Toyota said it would spend nearly $3 billion to build software for autonomous cars, the latest sign that Japan’s biggest car maker is pushing to get the cars into the hands of consumers. Toyota is nearing a self-imposed deadline of 2020 for selling cars that can pilot themselves on freeways, with city-street capability a few years later. The new company will try to bridge the gap between researchers at the Toyota Research Institute in California and the engineers who design the vehicles in Japan, said Jean-Yves Jault, a Toyota spokesman.
ARTIFICIAL INTELLIGENCE, DRONES, FUTURE TECH
On Thursday, the U.S. Navy awarded Lockheed Martin Corp. a $150 million contract to develop a high-powered laser system to integrate with a destroyer by 2020. The deployment of a laser weapon system represents “a watershed moment for directed energy,” Rob Afzal, a Lockheed Martin senior fellow, told reporters. “Laser weapons systems have been desired for decades. One of the missing pieces to actually deploying laser weapons was that we didn’t actually have a laser that was powerful enough and small enough and efficient enough.”
Smart, sweat-resistant earphones—called “hearables,” or wearable in-ear gadgets—not only deliver music from your smartphone without the fuss of wires. They can also track your pulse, count steps, measure distance and pace, tally the flights of stairs you climb, figure out running routes, and estimate how many calories you’ve burned—data that help quantify your performance and inspire you to push yourself harder toward your next fitness goal.
Computer scientists and amateur sleuths are hot on the trail of huge prime numbers, some of which are named for a 17th-century French monk. Because primes follow no known pattern, they’re impossible to predict. Each candidate must be tested. The simplest test involves methodically checking to see whether a potential prime can be evenly divided by smaller numbers, an approach that is impossible for gargantuan figures like the one Mr. Pace discovered. “There’s not enough computer power to do it,” said George Woltman, who wrote the software Mr. Pace used to discover his prime. “You can test maybe 100 digits by trial division but to look for a really big prime number, you have to have a special form.”
Sir Roger Bannister, the first person to run a mile in under four minutes, has died at the age of 88. His time of three minutes 59.4 seconds, set at Iffley Road sports ground in Oxford on 6 May 1954, stood as a record for just 46 days but his place in athletics history was assured. Bannister also won gold over the same distance at the 1954 Commonwealth Games and later became a leading neurologist. He was diagnosed with Parkinson’s disease in 2011.
The importance of the hidden dimension of luck raises an intriguing question: Are the most successful people mostly just the luckiest people in our society? If this were even a little bit true, then this would have some significant implications for how we distribute limited resources, and for the potential for the rich and successful to actually benefit society (versus benefiting themselves by getting even more rich and successful).
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